Chapter 8 - Operation of PAYE System Flashcards
Reporting
A full payment submission (FPS) details PAYE income and deductions must be submitted on or before the date of payment
Where payment is a readily convertible asset, the details must be submitted as soon as reasonably practicable after payment is made, but no later than 14 days after the end of the tax month in which the payment is made.
Payment
PAYE is due 17 days after the end of the tax month if paid electronically or 14 days if not, ie it’s due on the 22nd or the 19th.
PAYE can be paid quarterly if total tax and NIC due is less than £1,500 per month on average.
Large employers (250+ staff) must pay electronically
Interest runs on late payments from the due date.
Date of Payment for PAYE Purposes
Earlier of:
- time when payment is made
- time when the person becomes entitled to it
There are special rules for directors
Year End Procedures
Final Payroll report must indicate that it’s the final one. A P60 must be provided to every employee by 31 May following the end of the tax year.
A form P11D must be submitted to HMRC where an employee has taxable benefits not on the payroll. Must be provided to the employee by July 6th
Any payroll benefit information must also be provided to the employee by 31 May
Form P46 (Car)
There is one other form that may be required. The P46(Car) must be sent to HMRC when an employee first gets a company car, when they get an additional car or when they cease to have a car. They must be submitted within 28 days of the end of the quarter (5 July, 5 Oct, 5 Jan, 5 April). Submitted online or on paper.
Starters and Leavers
Leavers must be given a P45. Date of departure must be on the FPS. P45 contains pay and tax from the start of the year up until termination of employment.
New employer must report a starter declaration for the employee and determine the tax code. If P45 relates to previous tax year, an emergency code is applied.
Starter Declaration
Must state one of three things:
- its employees first job since 6 April and they’ve not received JSA, employment and support allowance, incapacity benefit or a pension. In this case, tax is deducted on cumulative basis
- This is their only job but they had another job in the year or received any of the things mentioned above. In this case, emergency tax code, taxed non-cumulatively
- They have another job or receive a pension. In this case a BR tax code is used meaning tax is deducted at basic rate without any PA given
New Employers
Must register with HMRC as an employer and access the PAYE online service.
Late Payment of PAYE - Interest
Interest is due to HMRC on late tax paid from the due date to the date of payment. If tax is overpaid, then repayment interest will be due from HMRC
Late Payment of PAYE - Penalties
Penalty amounts depends on the number of defaults during the tax year:
1st-3rd = 1% of the tax and NIC paid late
4th-6th = 2%
7th-9th = 3%
10th+ = 4%
Additional 5% is charged if an amount is more than 6 months late, and again if more than 12
Late Filing Penalties
If an FPS is submitted late there is a penalty. Depends on the number of employees within the scheme:
0-9 = £100 per month
10-49 = £200 p/m
50-249 = £300 p/m
250+ = £400 p/m
Additional 5% of tax and NIC due charged where a return is 3 months late.
P11Ds = £300 per form and £60 per day for continued failure
Incorrect Forms - Deliberate and Concealed
100% max
Unprompted: 30% min
Prompted: 50% min
Incorrect Forms - Deliberate but not Concealed
70% max
Unprompted: 20% min
Prompted: 35% min
Careless
30% max
Unprompted: 0% min
Prompted: 15% min
Careless penalties can be suspended for 2 years
Incorrect P11D
If fraudulent or negligent a penalty of up to £3,000 per form can be issued
